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Is Facebook Monetising the Wrong Opportunities?

This entry was written by one of our members and submitted to our YouMoz section.The author's views below are entirely his or her own and may not reflect the views of Moz.

I visited the Technology for Marketing and Advertising 2008 conference in London earlier this month and attended an interesting seminar with Blake Chandlee, the Commercial Director of Facebook in the UK.

He started by regaling us with some pretty impressive user stats, and then took us through the advertising options on Facebook. He started out with Facebook Ads.

Now, when I first started out in marketing I was told by my boss that there were ‘three golden rules’ of successful advertising, namely to deliver:

the right message

to the right person

at the right time

Let’s assume (for the sake of this debate) that we want people to purchase something. So, we try Facebook Ads.

Indisputably, Facebook holds a lot of data on their users. On this basis, you can argue that via Facebook you should be able to target the right person (or people); and if you’ve a modicum of talent, one would hope that you could create a compelling message, thereby ticking the 'right message' box.

I think that if we go back to the ‘golden rules’, it’s pretty obvious. It’s all about timing. Now, I’m totally up for the debate on this one, but when I go to Facebook I’m not in the market to make a purchase. When I go to Facebook I’m there because I want to make contact with my friends. Therein lies the problem. I think that this is where Facebook advertising struggles. Even if the ad is pretty targeted, the timing’s off. The ads are at odds with people’s Facebook usage.

If I want to make a purchase, I would be more inclined to head over to my favourite search engine and maybe do a bit of research. Or, depending on what I was looking to purchase, I might just go directly to a favoured site. For example, if I was interested in buying a book I might just head straight to Amazon and have a look at their recommendations based on my previous purchasing behaviour.

So, how can you get advertising in front of Facebook users in a way which is more in line with the way they use Facebook?

Blake had the answer - he went on to talk about Facebook Pages.

You can create a Facebook Page for your brand, and it’s free! Now, for my money, this is a really interesting proposition – here’s an opportunity for you to engage with people who are interested enough in your brand to become a ‘fan’. Rather than interrupting users’ social media experience, you are working your brand into the very fabric of the social network. If users like your brand enough to become a ‘fan’, this appears in their mini feed. They may also like you enough to actively promote you to their friends.

There’s lots you can do via your brand’s Facebook page – you can create forum topics to spark discussion; and you can even message your fans. Nice, huh?

So, let’s get back to our end game. We want people to purchase something, remember? Let’s imagine that we’ve set up our brand, got ourselves some fans, and it’s all looking rosy. How do we convert these lovely people, to encourage them to purchase from us?

Simple – we can send them a message regarding whatever we want them to buy. Oh, and as we haven’t had to pay for the advert, we could even do a money-off offer or something similar.

Now, in my mind, that’s where the real value lies, as not only have we actively engaged with our consumers and given them a space to communicate with us, we have also been able to deliver them an offer – all for free.

This begs the question, given that Facebook needs to monetise the site: why haven't they gone with Facebook Pages?

How? Perhaps a small charge to set up the page, plus charges to communicate with your fans – perhaps on a per fan basis? I’d also look to offer a premium Facebook Page for brands who want additional functionality – like the ability to select which fans they want to communicate with, rather than only offering a "communicate with all" option. This is all off the cuff -- there must be loads of ways to monetise the pages.

27 Comments

"I think that if we go back to the ‘golden rules’, it’s pretty obvious. It’s all about timing."

Hannah,

I would argue that it has more to do with the demographics of the audience, location of the ads and intent of the surfer, then it does the timing, although it seems that maybe by "timing" you were conveying "intent" - meaning that you don't typically visit Facebook with the intent to click on ads, whereas if you were using a search engine, your intent is to find something you can click on.

Further, if your search term is something like "cheap brown leather jacket", the term would convey an intent to buy a product, whereas if your keyword was "types of leather jackets", it would convey an intent to find information.

By and large, I think social media users are more savvy than the average Joe that hits the search engines, so from a demographics perspective, social media sites knock out a large percentage of those that would be more likely to click on an ad.

Dating ads convert because people are there to ogle cute members of the opposite sex. It's about how the site is used, you're right, but pages are not the answer, and I know for a fact that the ads convert. In fact, they often convert as well as or better than AdWords. People saying otherwise either haven't tried hard enough or are succesful and trying to discourage competition.

That's a really interesting point about timing. I think there are similar context problems with Facebook. Ads on Google may be mildly annoying, but when we're searching, we're actively pursuing information and in that context, are more open to ads. Facebook still has the aura of a place you go to hang out with friends, and any ads, no matter how well targeted, are going to still seem obtrusive.

Honestly, I don't think Google can even replicate Google's advertising model (they're going to have a hard enough time maintaining it, as people realize how bad their conversions are). I seriously doubt that Facebook can duplicate it. It's going to take a lot more than just a big audience and tons of data.

Agreed. I think that part of the problem is that users perceive that social networking should be free AND not littered with ads.

I wonder if the audience might be interested in a paid for service - e.g. say they pay a nominal sum (e.g. $5 per year) to use a social network site and in return that network promises not serve them ads or sell their data?

Regarding pages - I think these are solutions to small companies that want a dedicated area - the groups wasnt just cutting it! Infact there are so many new applications that it works really well, also note if you are a fan, it shows on your profile, so there is the viral effect that FB is famous for. I had 3 of these set up when pages were introduced, and never checked them, looking back after this post, I have over 800 fans for one and the other has over 1000... they were for UK music artists that I know and I will transfer them to their control...I dont do much with them.

BNut as for your post - you are right FB monetisation from a mass point of view leaves much to be desired, although for companies who can pay their professional groups fees... well...thats a large chunk of change.

FB has just hired Sheryl Sandberg, who has been working at G. during 6 years as their vice president for global online sales and operations. She was a major executive for G. She is coming into play, in order to "solve" the monetization of FB. So new things should be coming along pretty soon..

@Sean - 'timing' for me sort of covers off 'intent', as I don't think you go to facebook with the intent to buy - but I could have definitely made that clearer :)

I really liked your point re the demographic of social media users being a bit more media savvy and therefore less likely to click on ads - not something I'd considered previously; but I concur it's most likely a factor. This was also echoed in the article which Ciaran linked to.

@Artur - I guess what I'm trying to say is that, to date neither Facebook or indeed MySpace have been able to successfully monetise their sites. The users find the ads intrusive and the advertisers are not happy with the results which they're seeing.

The estimated worth figures bandied around are all on the basis that at some point someone will figure out how to successfully monetise these sites - and I would hazard a guess that unless someone figures something out soon those estimated worth figures will begin to fall. It wouldn't be the first time the dot com bubble burst.

@Ciaran - thanks for the link to that article, and I loved the Diet Coke example :)

I definitely understand your point of view. However, myspace has been using ads from the get go and till this day the revenue from the ads is their main source of income. Yahoo, Google, Ebay, Commision Junction, all of these companies are buying tons of ad space on myspace. Here are some numbers to look at:

Myspace (part of eUniverse.com) start-up cost back in 2001: $2 million +-

Years of development: 2 years

Number of fulltime developers: 4-6 (some were remote)

Later acquired by FOX Interactive for: $580 million

Almost 3 years later – Today’s Estimated Worth: from $10 billion to $15 billion USD.

With regards to Facebook Pages, in theory I agree - except for the fact that most brands aren't doing anything very interesting with these pages. Until Facebook takes the time to seriously invest in educating major advertisers in utilising its services in interesting & engaging ways, they're likely to keep on going as they are (IMO). I mean, just look at how a cool brand like Diet Coke is setting the Facebook world alight!

Surely Facebook Ads are the most useful when trying to 'steal' some sales from direct competitors. I regularly use Facebook to target ads to a demographic who have openly stated their love for a direct competitor.

This may sound strange but put it this way, if i sell a product that is very similar to a competitor but at 10% cheaper than the competitor and i know the demographic likes the style of my product throughr liking a competitor and they can now get it for 10% off!! i am going to get a lot of visits/sales

A perfect example is an online modern clothes store, similar to USC, Ted Baker, Topman, Burtons etc. If they target their ads to people who have declared they like the style of clothes they purchase from the competitors and they sell similar items you can guarantee they will like your clothes. Whether they purchase on the first visit depends on a lot more things, including the site/trust choice etc. However you know you have already increased your brand awarness by 1, and if he tells 2 friends who tell 2 friends... £££££

I’m not necessary suggesting using Facebook purely as a direct form of sales, or as the only form of advertising. I am suggesting Facebook is a very useful addition to the marketer’s armoury, which should be used to complement AdWords for example. Naturally you couldn’t survive on Facebook as direct sales, however the increased brand awareness (similar to the company pages on Facebook you mention! :P) can then bring in indirect sales, which are very difficult to track through analytics but will more than likely increase your ROI. (Although targeting competitors as previously mentioned will not work for all markets I must admit)

As Rishil says you can view page stats on your page which is pretty neat. As for updating your fans when something is added to the page I think it only appears in newsfeeds when they actually interact with the page, but that's still fairly powerful in terms of viral marketing.

I also really like that you can message all of your fans - although as I said before it would be handy to have an alternative option to message selected fans rather than all.

How much exposure do fan pages get? I created the SEOmoz fan page: if I add pictures, wall posts, photos, etc, does it show up in the news feeds of fans? Or do I have to message the 215 fans and let them know that I've added the SMX Advanced video montage to the page?

I feel like groups and fan pages can be neglected by their users and their administrators because, unlike wall posts, picture comments, etc, the actions that take place on them are easily overlooked. The "recently updated" feature on the Groups page doesn't work terribly well.

According to its What's New page, Facebook is about to launch news feed stories about groups. Adding fan pages to this would make the pages more useful, I'd have thought.

if I add pictures, wall posts, photos, etc, does it show up in the news feeds of fans?

I think they do, but if not, certainly the activity that goes on by fans on the page does - see FBs info...

The great thing about fan pages is that FB have introduced a stats meter, which can then link with your ads as well so you have a asmeter and interaction analysis.

See a present meter for a UK Asian music artist that I created a fan page for (p.s I did zero marketing and just created the fan page - there isnt any other content on it cause I forgot that I created it... )